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Monday, 1 March 2004

Coflexip SA and another v Stolt Offshore MS Ltd [2004] EWCA Civ 213 raises a point of great principle: should a person be made to pay damages for patent infringement even if the patent he has allegedly infringed is later found to be invalid following proceedings fought out between the patent’s owner and another alleged infringer? In Coflexip, after the Court of Appeal affirmed that Coflexip’s patent was valid and that Stolt had infringed it, the Court of Appeal ordered an inquiry as to damages. While that inquiry as to damages was proceeding, a company unconnected with Stolt issued proceedings against Coflexip for revocation of the same patent. In that action the judge revoked the patent, citing prior art that had not been referred to by Stolt either at first instance or the Court of Appeal. In the light of the patent’s revocation, Stolt applied for a stay of the inquiry into damages, arguing that the subsequent revocation of Coflexip’s patent provided either a complete defence to the claim for damages or a bar to that patent’s enforcement. Jacob J refused to grant a stay of the inquiry into damages on the ground that the revocation of the patent would not lead to Stolt’s liability for damages being effectively discharged. Stolt’s appeal against that decision was dismissed by a 2-1 majority (Neuberger LJ dissenting).

The majority considered that finality in litigation would be lost if a final decision on the validity of a patent and its infringement could be reopened if another person secured the invalidity of that patent, with a consequent order for revocation, and if that revocation could be relied on in an inquiry as to damages in the earlier action. Stolt could not plead issue estoppel since Stolt itself could, with reasonable diligence, have adduced the fresh material on which the Coflexip patent was later invalidated. In the circumstances it was an abuse of process, after the validity of the patent was finally decided between Coflexip and Stolt, to go back to that decision. There was also a public policy consideration in that if a defendant, having finally lost a patent action, knew that an application for successful revocation by another might get him off the hook for damages, he would have every motive for digging up better prior art and encouraging another to attack the patent. So, although he himself could not re-litigate validly, the rule against relitigation could be subverted indirectly. Stolt could not therefore be allowed to rely on the subsequent revocation of Coflexip’s patent.

In a judgment which towers over the paltry offerings of the majority, Lord Justice Neuberger’s dissent provides a long and detailed critique of the issues and comes down forcefully against “the offensiveness of the notion of Stolt being liable for, and Coflexip being entitled to, tens of millions of pounds for infringement of a patent which is now shown to be invalid, with retrospective effect”. This case will surely go to the House of Lords, where the IPKat’s money is on Neuberger LJ’s analysis being preferred to that of the majority.

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